The dominance of the global knowledge economy is posing an increasingly higher pressure on the developing nations to adapt to new development paradigm where knowledge and skills constitute the basis for economic growth. Whereas natural resources and low labour costs no longer are regarded as sufficient to maintain sustainable economic development, it is argued that the transformation to a knowledge-based society is a prerequisite for countries that want to maintain comparative advantages. This has lead many developing countries to adapt the discourse of the knowledge economy to their development strategies. The question on how poor developing countries can match these highly westernized doctrines with their own reality and doing it with a successful outcome does however remain. Based on the case of Mozambique, this thesis does an attempt to identify the major constraints that an African developing country meets in the adaption to the knowledge economy. This is done by analysing the adaption- readiness of two main agents of change, namely the system of higher education and the private sector. The study shows a range of severe internal limitations of the two agents and a serious gap between the human recourses and knowledge produced in the system of higher education and the needs of the private sector. It furthermore shows that Mozambican institutions are characterized by a highly conservative culture, where knowledge-sharing and collaboration is being regarded as the exception rather than the norm. It is therefore argued that Mozambique foremost needs to strengthen the functioning of the knowledge producing and consuming agents and their mutual interconnectedness before the initiatives presented in knowledge and innovation-based strategies can be successfully realised.